Average mortgage rates climbed moderately last Friday. Indeed, they rose on every business day last week. However, that followed a week of mainly falls. And those rates begin this morning close to where they were at the start of March.
First thing, it was looking as if mortgage rates today barely move. But that could change later in the day.
Current mortgage and refinance rates
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Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.12%
7.13%
+0.02
Conventional 15-year fixed
6.62%
6.65%
+0.03
Conventional 20-year fixed
7.15%
7.17%
+0.04
Conventional 10-year fixed
6.64%
6.66%
Unchanged
30-year fixed FHA
6.49%
7.17%
+0.01
30-year fixed VA
6.61%
6.72%
+0.02
5/1 ARM Conventional
6.28%
7.38%
Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
I doubt we’ll see mortgage rates enter a consistent downward trend much before the summer, and possibly later.
So, for now, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes held steady at 4.32%. (Neutral for mortgage rates. However, yields were rising this morning.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices increased to $81.35 from $80.62 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices inched down to $2,159 from $2,162 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — nudged up to 75 from 71 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to hold close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
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What’s driving mortgage rates today?
The Fed
The Federal Reserve’s rate-setting body (the Federal Open Market Committee or FOMC) begins a two-day meeting tomorrow. And a flurry of events is scheduled for the following afternoon.
Almost nobody expects an announcement of a cut in general interest rates on Wednesday. But events that afternoon include:
2 p.m. Eastern — Rate announcement and report publications
2 p.m. Eastern — Summary of Economic Projects publication. This occurs only quarterly and includes a dot plot
These FOMC documents and the news conference may provide new insights into how the Fed’s thinking on future cuts to general interest rates is evolving. So, markets globally will be paying the closest attention to every word written and uttered.
And there is huge potential for Wednesday’s Fed events to move mortgage rates.
I covered this in last Saturday’s weekend edition. And I’ll brief you in more detail again on Wednesday morning so you’ll know what to look out for.
Other influences on mortgage rates this week
Most of the economic reports on this week’s calendar are unlikely to affect mortgage rates. It’s not impossible. But they cover areas of the economy that rarely interest the bond investors who largely determine those rates.
Today’s lone report is a good example. It’s the home builder confidence index for February, which came in as expected. I don’t recall the last time that had a perceptible influence on mortgage rates. And the same goes for tomorrow’s housing starts and building permits, also for February.
The two reports that might move mortgage rates this week are both March purchasing managers’ indexes (PMIs) from S&P. One covers the services sector and the other manufacturing.
They’re both expected to show purchasing activity slowing modestly. But I’ll brief you more fully on what to expect on Wednesday.
Friday has no scheduled economic reports. However, three Fed speakers, including Chair Jerome Powell, have speaking engagements that day. Those could be an opportunity to reinforce messages communicated on Wednesday and to correct any misunderstandings. So, they could have an impact on mortgage rates.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Mar. 14 report put that same weekly average at 6.74% down from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
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Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
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Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
As the world awakens from its winter slumber and the air fills with a sense of renewal, there’s no better time to embark on the ultimate spring reset for your home. And with this sense of renewal comes an energetic craving to tidy up our homes and welcome the spring season. After a long winter season, where’s the best place to begin refreshing the home?
From decluttering and organizing to deep cleaning rituals and nature-inspired decor, this ApartmentGuide article is your guide for tips and techniques for crafting a sanctuary for the spring season ahead. Whether you live in an apartment in Des Moines, IA or a rental home in Portland, OR, and are looking to incorporate fresh florals, declutter your space, or embrace a new color palette, we’ve got you covered.
Step 1: Get a fresh start by decluttering and organizing
Decluttering your home is not just about tidying up; it’s about creating a sense of space, clarity, and peace within your home. By eliminating excess belongings, you can reduce stress, increase productivity, and improve overall well-being. Start by breaking down decluttering tasks into manageable chunks, focusing on one area at a time to avoid overwhelm. Sort items into categories such as keep, donate, sell, or discard, and be ruthless in your decision-making process. Ask yourself if each item serves a purpose or brings joy, and if not, let it go.
Organizing also plays a vital role in maintaining a functional living space, promoting efficiency, clarity, and well-being. Assess your needs, devise a plan, and utilize storage solutions to categorize items effectively. Regularly declutter and reassess to maintain efficiency.
Seek permission and compromise
If you live with one or more people, it’s important to seek permission and compromise when decluttering. Professional organizer Nassim Secci of The Happy Space Co. emphasizes, “Overcoming the hurdle can be challenging, especially when a spouse is hesitant to let go. Start by gaining permission to organize items without discarding any initially, ensuring they consent to any discarding. The act of categorizing and rearranging possessions can often spark a positive shift, and even without discarding, an organized space can bring a sense of order and freshness to your home.”
Store winter gear
With spring on its way and summer just around the corner, Sarit Weiss, founder of Neat and Orderly home organizing company, recommends walking through the house collecting all winter accessories, gear, and clothing. “Place them in clearly labeled bins or using transparent bins for easy visibility, and find a place to store them for the season. Think under beds, on a high shelf in a closet, or consider investing in a small storage unit if necessary. With this system, you’ll free up space for the current season’s essentials. Bring the beach chairs, summer accessories, and sports equipment to the front of your closets or mudroom for easy access.”
Aim for progress, not perfection
“Spring heralds abundance, possibility, new life, and growth — a sense of everything falling into place,” shares holistic life coach, Carmen Ohling. “This spring, our aim is progress, not perfection, recognizing the link between mental clutter and physical disorder. Clean out your sock and underwear drawer, discarding stained, hole-ridden, or overly stretched items.
Select one task from the list—organize the kitchen utensil drawer, back half of the clothes closet, desk drawer, makeup bag and skincare drawer, or junk drawer — completing it fully. Often, we hoard due to scarcity mentality or comfort in the past. Assess each item’s alignment with your present self; if unused in six months, discard. Embrace Marie Kondo’s principle: If it doesn’t spark joy, let it go.”
Step 2: Tidy up your living space
Deep cleaning your home not only restores a sense of freshness but also promotes a healthier living environment. Prioritize areas that accumulate dust and grime, such as baseboards, ceiling fans, and vents. Use a microfiber cloth and all-purpose cleaner to wipe down surfaces, paying attention to neglected spots like light switches and doorknobs. Don’t forget to vacuum carpets and upholstery thoroughly, and mop hard floors with a disinfectant solution. Finally, tackle overlooked areas like behind appliances, inside cabinets, and beneath furniture to ensure a thorough cleaning.
When it comes to refreshing your space for the spring season, lifestyle blogger Kimberly Samantha from Brunch and Gloss advises, “Edit, edit, edit.” According to Samantha, “Right after the holiday season, spring cleaning is the best time to go through what you have and make a whole household edit. Everything should have a home; if something doesn’t have a home, then chances are you don’t need it. Take time to organize your space in a way that’s functional and achievable for your lifestyle.”
Step 3: Refresh your wardrobe
Refreshing your wardrobe in spring is a chance to not only update your style with fresh colors and patterns but also clean out your closet and maximize your space.
Practice the one in, one out rule
“Consider adopting the ‘one in, one out’ rule,” suggests personal stylist Beth Divine, MA, AICI-CIC based in Indianapolis, IN. “For every new item you bring into your wardrobe, donate one to a charitable organization. Embrace a new trend by trying out sling-back shoes, particularly in trendy styles like two-tone spectators or vibrant colors like blue, pink, or green. You might be surprised by how often you reach for them. Or, add a pair of straight, dark rinse or cream color jeans to your wardrobe that’s easy to pair with anything. Finally, work with a professional to learn your best colors; build your wardrobe or clean out your closet.”
Shop your closet
“Take inventory, mix and match pieces, and integrate items from your winter wardrobe for new outfits, saving money and keeping your closet clutter-free,” explains certified wardrobe stylist Lisa Samsom of Vermont Wardrobe Styling. “Be sure to use a steamer to remove wrinkles and freshen up clothing after bringing them out of storage. Explore your winter wardrobe for burgundy, a hot spring color, and pair it with tans and creams. Create a ‘most wanted list for winter’ to guide future purchases and prevent unnecessary buys. Embrace pre-loved items at thrift stores and vintage shops. To declutter effectively, adopt an ‘outfit mindset’ by assessing each item’s versatility and styling potential, helping you differentiate between essential pieces and unnecessary clutter.”
Add a splash of color or pattern
“Embrace the spring season by incorporating pastel shades and floral prints into your outfits, which can easily be mixed and matched with neutral pieces you already own,” shares Nancy Queen, wardrobe stylist at Shopping on Champagne. “Consider layering lightweight fabrics to navigate the unpredictable spring weather stylishly. This approach not only refreshes your look but also allows you to experiment with different combinations without a complete wardrobe overhaul.”
Step 4: Integrate spring into your interior design
Bring a refreshing burst of color into your home, infusing spaces with the vibrant energy of the season. By incorporating spring decor elements like light pastel colors, natural textures, and floral accents, you can create an uplifting and rejuvenating atmosphere within the home.
Evoke the essence of spring
“As we transition into the warm embrace of spring, the longer days and pleasant, soft sunlight often inspire us to change,” shares Debora Interiors, a virtual interior design service and 3D renderings to create customized designs. “Evoke the bloom of nature into your home by introducing floral touches and soft pastels through fabrics, wall tapestries, décor, and wall paint. Opt for lightweight, natural fabrics such as cotton and linen for your textiles to allow your space to breathe and let the warm sunlight in. Fresh, colorful flowers will be your best friend as they are the finishing touch to any inviting home.”
“I love infusing my living space with lighter colors and vibrant energy,” says Gretchen Reese, lifestyle blogger at Monochrome Minimalist. “Whether it’s introducing a fresh pillow cover or a lighter throw, placing a new plant by the window, or indulging in a scent that evokes the essence of the changing season, each touch revitalizes my space, breathing new life into it for the springtime.”
Embrace the power of simplicity
Melissa Vera, blogger at Adventures of Frugal Mom says, “Clear away winter remnants, opt for lighter and brighter hues, and strategically place mirrors to amplify natural light. Introduce floral accents, be it through fresh blooms or botanical-themed decor, for an instant burst of springtime charm. Embrace a minimalist approach, allowing your space to breathe and embody the refreshing essence of the season.”
Display one-of-a-kind items that have a deep connection to your roots
Erica Shepard, NCIDQ, IIDA, LEED AP ID+C, Owner + Principal Designer at Shepard Design Studio, explains that a home should have a timeless foundation that can seamlessly adapt to the evolving trends while allowing a canvas for personal expression.
“Think bold accent walls, statement furniture, or playful accessories that can thoughtfully incorporate meaningful pieces. This could mean uncovering treasures from your closet or storage spaces – cherished family heirlooms could take center stage on your gallery wall or you could feature vintage furniture pieces awaiting to be refreshed. Your local frame shop or services like Framebridge are great DIY resources for displaying beloved objects or nostalgic photos in your home,” suggests Shephard.
Bring nature in
Our homes offer us the perfect excuse to embrace the changing season. According to Heather Calder, owner of Heather Interior Design, you can refresh your space with something as simple as a new paint color to freshen and liven up the space.
“Try something new and be bold,” suggests Calder. “Adorn your front door with a welcoming floral wreath and infuse the air with the scent of spring using candles. Incorporating nature into our living spaces offers countless benefits.”
Infuse your space with cheer
“With spring’s arrival, now is the ideal time for a home refresh,” states Cemre Yurdakul, interior designer and property stylist at Cinnamon & Vanilla Interior Design. “Consider replacing those heavy winter blankets with light and airy throws in vibrant spring hues like sunny yellows or soft pastels. Incorporating a few potted plants or fresh flowers can infuse your home with the rejuvenating essence of spring. Let’s aim to create living spaces that radiate the brightness and cheerfulness of the season itself.”
Step 5: Brighten up your space with flowers
By incorporating flowers, you can instantly add a vibrant burst of color and a delightful fragrance, lifting spirits and bringing a touch of nature indoors.
Use blooming branches for a touch of spring
“Cutting branches from trees and shrubs in the early spring is an easy way to bring some drama into your home,” shares Megan, owner of Field Floral Studio, a fine art florist in Portland, ME. “Given fresh water and warmth, bare branches will start to leaf out or flower depending on which variety you choose. Cut each branch on a slant, place it in a large vase, and watch the magic unfold.”
Portland, OR-based flower delivery By the Bunch Floral Alchemy also recommends decorating with branches. Celebrate spring by bringing blooming branches indoors — dogwood, quince, forsythia, tulip, star magnolia, cherry, and plum blossom create stunning displays. The trick with these is to cut them early as soon as the buds start to show, splitting stems for better water absorption, and be sure to change the water every couple of days to get them to last longer. The warm interior temperatures will speed up their blooming process, and depending on how early you cut them, you might get as much as a week or two out of them. Local flower farms typically offer CSA subscriptions for seasonal blooms, with some providing delivery. Consider researching nearby options to support local.”
Choose seasonal and local blooms first
“Choose seasonal and local blooms first,” advises Bianca Sparta, owner of Colibri Flowers in Portland, OR. “This ensures that your flowers are as fresh as possible and will give you the longest vase life. Flowers should spark joy so choose and arrange however pleases you the most.”
Step 6: Incorporate principles of personal growth
This spring, prioritize fostering a nurturing environment that supports individual development and well-being. By surrounding oneself with reminders of personal goals, affirmations, and inspirational quotes, one can cultivate a mindset of growth and self-improvement in their daily life.
Focus on what you desire to maintain
“Your environment can support you in creating your ideal habits and routines,” explains Jessica Malone, life coach at Nacho Average Fro. “First, before you declutter, identify how you want to use the space, then identify what items can assist you. For example, if you want to spend more time journaling, consider where to place your journal and what additional items you need to support that habit.
Once you’ve selected the space, remove the items currently in that place and ask yourself ‘Do any of these items support my desired habits and routines?’ Whatever does not support you should be let go. After you’ve dedicated space to the things that support the life you desire, you’ll build new habits with ease.”
Create a space where you feel like you belong
Life coach Nisha Mody shares, “Spring is a great time to plant seeds for new growth within ourselves and in our environments. I love to think of ways to resource myself in different environments, and I encourage my clients to do the same. Resourcing ourselves is about finding something we can attune to that makes our bodies feel safe and like we belong. In terms of living spaces, this can mean having a photo of a loved one near a workspace, putting a plant near a window to witness its growth, or thinking of color palettes that soothe your body and soul.”
Establish tech-free zones in your home
“By designating specific areas as tech-free, you can create a space that fosters mindfulness, clarity, creativity, and real connections,” explains Abbey Sangmeister, life coach and therapist at Evolving Whole in New Jersey and Philadelphia, PA. “Make this a space you will want to go to; one with great lighting, candles, plants, and a journal in that area. Keep journal prompts, affirmations, or a card deck in the area to help you focus on personal growth, especially if you are feeling stuck with prompts. Personally, I am not a minimalist, so I like having trinkets, photos, art, and little reminders from travels and challenges I’ve accomplished surrounding me.”
Unlock motivation with the fresh start effect
Aileen Axtmayer, career coach at Aspire with Aileen based out of Boston, MA, discusses the ‘fresh start effect.’ “Our brains are more inclined to take action when they perceive the start of a new time period, such as the onset of a new year or season. With the arrival of spring, a new season commences, providing an opportune moment to refresh our environments and reinvigorate our pursuit of goals.”
Step 7: Focus on your emotional well-being with meditation
Meditation cultivates inner calm, resilience, and a greater sense of clarity amid life’s challenges. Integrating meditation into your life this spring can foster a harmonious environment conducive to self-reflection, renewal, and embracing the transformative energy of the season.
Create a dedicated space
“It’s true you can meditate anywhere; however, creating a dedicated space for meditation can help you support and maintain your practice,” says Claire E. Parsons, lawyer, meditation teacher, author, and founder of the Brilliant Legal Mind blog. “First, consider what kind of energy best supports your practice. Do you need calm and quiet, a cozy container, or light and space? Next, identify a small space that suits these needs and fits functionally with your lifestyle. Then, simply add supportive elements, including cushions, a bench, blankets, candles, and any decorative or spiritual items, and your space is ready for sitting in comfort.”
Lauren Schuivens, founder and CEO of Samavira Meditation, meditation training that helps you adapt traditional techniques to how your mind works best, explains that the area you choose to dedicate to your practice can be as simple as a corner in your room. “Add cozy seating, plants, soft lighting, and soothing colors. Personalize it with items like candles and crystals to enhance relaxation. Having a dedicated meditation space not only allows you to rejuvenate and find inner peace amidst the changing seasons, but can also help you drop into your practice more easily and deeply as your body begins to associate the space with a sense of tranquility.”
Invite tranquility and renewal in
Brennan, founder of meditation company Mindkee, dedicated to helping you relax and breathe, weighs in on this topic. “Elevate your ambiance by incorporating a cozy meditation pillow or cushion, gently nudging you towards moments of mindful reprieve. Infuse the air with calming aromas from incense or scented candles, or enliven the space with air-purifying plants for a serene atmosphere.
Surround yourself with imagery that inspires peace and positivity, whether it’s pictures of sages or loved ones who bring solace to your spirit. Above all, commit to a daily meditation practice to foster mental well-being and embrace the transformative power of consistent mindfulness in your life. Stay blessed, stay positive, and don’t forget to relax and breathe because your mind is key.”
Step 8: Bring the outdoors in with plants
Plants not only add aesthetic beauty but also enhance indoor air quality and boost mood and productivity. Incorporating greenery into your living space connects you with nature, fostering a sense of tranquility amid the changing season.
Begin fertilizing in early spring
Plant nursery Potted in Portland says spring is the perfect time to have a plant check-in. “We suggest starting spring plant care with fertilizing in March and assessing the soil to see if it needs a refresh or repotting. Prune away unwanted growth and remove any crispy or discolored leaves. Don’t forget, with increased sunlight, watering needs will likely increase as well.”
Consider your space and lifestyle
Tailored houseplant subscription service Plant in the Box, recommends plant parents to think about placement, care needs, and aesthetics to refresh their home. “Consider aloe vera or snake plants for bright sunlit spots. Fill slightly shaded or indirectly lit areas with philodendrons and ferns. If you lead a busy lifestyle or travel frequently, low-maintenance options like spider plants or pothos are ideal, requiring less frequent care. For aesthetics, decide if you prefer a plant that grows large, like the monstera, to fill a space, or something more compact, like a peace lily, to enhance your home’s look and feel.”
Mix textures and heights
“Opt for a mix of textures and heights when styling houseplants – consider combining trailing vines with tall, sculptural plants for a dynamic effect,” suggests Cultivated Creations, offering a unique collection of plants and local art in Baltimore, MD. “To boost your plant care routine, consider repurposing kitchen waste into homemade fertilizer using banana peels. Simply place banana peels in a mason jar, cover them with water, and let them soak for a week. After removing the peels, use the nutrient-rich water to nourish your plants, providing them with natural and beneficial hydration.”
Perfect picks for beginners
Mishele Freeman, founder of Emerald & Ivy Plant Boutique in San Diego, CA recommends a few beginner-friendly plants. “Golden pothos, ZZ plants, dracaenas, and snake plants are great beginner plants because they can tolerate any level of light, don’t need to be watered often, and are overall very low maintenance. These plants also have a neutral look to them, so pairing any of these with a fun pot (or even neutral, if that’s your aesthetic) makes it so easy to adapt them into your lifestyle. Keeping a pot neutral when paired with a more fun, detailed plant helps those intricacies stand out, and vice versa.”
Step 9: Find spring-inspired recipes that embody freshness
Spring brings an abundance of fresh produce, making it the perfect time to incorporate vibrant and nutritious recipes into your diet. From crisp salads bursting with seasonal greens and colorful vegetables to light and refreshing fruit-based desserts, there’s no shortage of delicious options to enjoy.
Embrace green foods
Monique Costello, functional medicine wellness coach and chef at Happy Eats Healthy weighs in on this topic. “As spring arrives, our bodies naturally crave fresh, light, and nutritious foods, signaling a desire to cleanse after the heavier winter fare. Incorporate greens generously by adding them to pasta sauces and soups, blending them into dressings, crafting wraps with leafy greens, or pulsing veggies into rice. For added nutritional benefits, consider topping dishes with sprouts, which boast a nutrient density 10 to 30 times higher than their mature counterparts.”
Eat your fruits and veggies
Salads are ideal for springtime as they incorporate fresh, seasonal produce, providing a light and refreshing option in warmer weather while offering a nutritious and satisfying meal. A great way to get your fruits and veggies in all at once is by simply combining the two.
Nina Cherie Franklin, recipe blogger at That Salad Lady recommends a berry spinach salad. “It’s a quick, delightful fusion of spring’s finest – fresh strawberries, blueberries and spinach, ready in under 15 minutes. Creamy avocado adds richness and heart-healthy fats, capturing the essence of spring with its fresh, buttery taste. Tossed in a homemade strawberry vinaigrette crafted from apple cider vinegar, extra-virgin olive oil, and honey, this salad strikes a perfect balance between sweet and savory flavors. This bowl is bursting with fresh flavors, textures, and nutritional goodness.”
Refreshing your home this spring
By decluttering, organizing, and infusing your space with the vibrant energy of the season, you can create a home that truly embodies the essence of spring. Whether it’s adding touches of greenery, embracing light and airy decor, or simply opening your windows to let in the fresh air, every small change can make a big difference.
As you breathe new life into your surroundings, embrace the beauty of simplicity, the joy of fresh beginnings, and the promise of growth as you embark on this transformative journey. Here’s to a season of growth, positivity, and endless possibilities in your beautifully refreshed space.
Average mortgage rates fell moderately for a third consecutive day yesterday. But don’t get too comfortable. The two economic reports that are most consequential for those rates are both due over the next few days. And they could change everything.
First thing, it was looking as if mortgage rates today might fall, perhaps modestly. But that could change later in the day.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.1%
7.12%
-0.06
Conventional 15-year fixed
6.46%
6.49%
-0.08
Conventional 20-year fixed
7.03%
7.05%
-0.01
Conventional 10-year fixed
6.48%
6.51%
-0.11
30-year fixed FHA
6.11%
6.77%
-0.13
30-year fixed VA
6.43%
6.54%
-0.08
5/1 ARM Conventional
6.29%
7.36%
Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
Are the steady falls in mortgage rates we’ve been seeing in recent days the start of the sustained downward trend I’ve been predicting? It’s possible. But I doubt it.
I’m not expecting that to begin properly for at least a couple of months and perhaps longer.
So, for now, my personal rate lock recommendations are:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes ticked down to 4.08% from 4.09%. (Good for mortgage rates. However, yields were rising this morning.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices inched down to $78.53 from $78.60 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices edged up to $2,174 from $2,158 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — increased minimally to 75 from 74 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to move downward. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
This morning, we finally saw the February jobs report (aka the employment situation report). And it might prove less bad for mortgage rates than one might fear.
Yesterday, I described the report’s three headline figures. Here they are again with this morning’s actual figures shown in bold:
Nonfarm payrolls (the number of new jobs created that month) — Today’s actual: 275,000. Markets were expecting that to be 198,000, well down from January’s 353,000
Unemployment rate — Today’s actual: 3.9%. Markets were expecting that to be 3.7%, unchanged from January
Average hourly wages — Today’s actual: 0.1%. Markets were expecting a 0.2% rise, much lower than January’s 0.6% increase
You can see that the unemployment rate and average hourly earnings numbers would typically be good for mortgage rates. But markets tend to react to nonfarm payrolls primarily. And The Wall Street Journal (paywall) reported the data under the headline, “Hiring Boom Continues With 275,000 Jobs Added.”
Still, the news wasn’t as dire as it could have been: Two out of three ain’t bad. So, I’m hoping that markets won’t punish mortgage rates too badly.
One caveat on today’s report — and other important ones. Markets don’t always respond in the ways we’ve come to expect. Sometimes, there’s a delayed reaction. Other times, investors might discover something hidden in the minutiae of the report that changes their response. And, occasionally, they just act perversely.
Next week
Just as this week has been dominated by this morning’s jobs report, next week is likely to pivot on Tuesday morning’s consumer price index (CPI).
We’re also due February’s retail sales figures on Wednesday and various inflation and other reports. But the CPI’s likely to rule next week.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Mar. 7 report put that same weekly average at 6.88% down from the previous week’s 6.94%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Millions of employees work from home at least part time. They’ve carved out dedicated office space and plopped laptops on kitchen counters and in closets. They almost never can declare the home office tax deduction.
Millions of self-employed people have also created workspaces at home. If they use that part of their home exclusively and regularly for conducting business, and the home is the principal place of business, they may be able to deduct office-related business expenses.
Why the difference? The Tax Cuts and Jobs Act nearly doubled the standard deduction and eliminated many itemized deductions, including unreimbursed employee expenses, from 2018 to 2025.
Read on to learn whether or not you may qualify for the home office tax deduction.
What Is a Home Office Tax Deduction?
The home office tax deduction is available to self-employed people — independent contractors, sole proprietors, members of a business partnership, freelancers, and gig workers who require an office — who use part of their home, owned or rented, as a place of work regularly and exclusively.
“Home” can be a house, condo, apartment, mobile home, boat, or similar property, and includes structures on the property like an unattached garage, studio, barn, or greenhouse.
Eligible taxpayers can take a simplified deduction of up to $1,500 or go the detailed route and deduct office furniture, homeowners or renters insurance, internet, utilities needed for the business, repairs, and maintenance that affect the office, home depreciation, rent, mortgage interest, and many other things from taxable income.
After all, reducing taxable income is particularly important for the highly taxed self-employed (viewed by the IRS as both employee and employer.)
An employee who also has a side gig — like driving for Uber or dog walking — can deduct certain expenses from their self-employment income if they run the business out of their home. 💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.
Am I Eligible for a Home Office Deduction?
People who receive a W-2 form from their employer almost never qualify.
In general, a self-employed person who receives one or more IRS 1099-NEC tax forms may take the home office tax deduction.
Both of these must apply:
• You use the business part of your home exclusively and regularly for business purposes.
• The business part of your home is your main place of business; the place where you deal with patients or customers in the normal course of your business; or a structure not attached to the home that you use in connection with your business.
Regular and Exclusive Use
You must use a portion of the home for business needs on a regular basis. The real trick is to meet the IRS standard for the exclusive use of a home office. An at-home worker may spend nine hours a day, five days a week in a home office, yet is not supposed to take the home office deduction if the space is shared with a spouse or doubles as a gym or a child’s homework spot.
There are two exceptions to the IRS exclusive-use rules for home businesses.
• Daycare providers. Individuals offering daycare from home likely qualify for the home office tax deduction. Part of the home is used as a daycare facility for children, people with physical or mental disabilities, or people who are 65 and older. (If you run a daycare, your business-use percentage must be reduced because the space is available for personal use part of the time.)
• Storage of business products. If a home-based businessperson uses a portion of the home to store inventory or product samples, it’s OK to use that area for personal use as well. The home must be the only fixed location of the business or trade.
Principal Place of Business
Part of your home may qualify as your principal place of business “if you use it for the administrative or management activities of your trade or business and have no other fixed location where you conduct substantial administrative or management activities for that trade or business,” the IRS says.
Can You Qualify for a Home Office Deduction as an Employee?
Employees may only take the deduction if they maintain a home office for the “convenience of their employer,” meaning the home office is a condition of employment, necessary for the employer’s business to function, or needed to allow the employee to perform their duties.
Because your home must be your principal place of business in order to take the home office deduction, most employees who work part-time at home won’t qualify.
Can I Run More Than One Business in the Same Space?
If you have more than one Schedule C business, you can claim the same home office space, but you’ll have to split the expenses between the businesses. You cannot deduct the home office expenses multiple times.
How to Calculate the Home Office Tax Deduction
The deduction is most commonly based on square footage or the percentage of a home used as the home office.
The Simplified Method
If your office is 300 square feet or under, Uncle Sam allows you to deduct $5 per square foot, up to 300 square feet, for a maximum $1,500 tax deduction.
The Real Expense Method
The regular method looks at the percentage of the home used for business purposes. If your home office is 480 square feet and the home has 2,400 square feet, the percentage used for the home office tax deduction is 20%.
You may deduct 20% of indirect business expenses like utilities, cellphone, cable, homeowners or renters insurance, property tax, HOA fees, and cleaning service.
Direct expenses for the home office, such as painting, furniture, office supplies, and repairs, are 100% deductible. 💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.
Things to Look Out for Before Applying for the Home Office Tax Deduction
If you’re an employee with side gigs or just self-employed, it might be a good idea to consult a tax pro when filing.
To avoid raising red flags, you may want to make sure your business expenses are reasonable, accurate, and well-documented. The IRS uses both automated and manual methods of examining self-employed workers’ tax returns. And in 2020, the agency created a Fraud Enforcement Office, part of its Small Business/Self-Employed Division. Among the filers in its sights are self-employed people.
The IRS conducts audits by mail or in-person to review records. The interview may be at an IRS office or at the tax filer’s home.
A final note: Taking all the deductions you’re entitled to and being informed about the different types of taxes is smart.
If you’re self-employed, you generally must pay a Social Security and Medicare tax of 15.3% of net earnings. Wage-earners pay 7.65% of gross income into Social Security and Medicare via payroll-tax withholding, matched by the employer.
So self-employed people often feel the burn at tax time. It’s smart to look for deductions and write off those home business expenses if you’re able to.
To shelter income and invest for retirement, you might want to set up a SEP IRA if you’re a self-employed professional with no employees.
Recommended: First-Time Homebuyers Guide
The Takeaway
If you’re an employee working remotely, the home office tax deduction is not for you, right now, anyway.
If you’re self-employed, the home office deduction could be helpful at tax time. To qualify for the home office deduction, you must use a portion of your house, apartment, or condominium (or any other type of home) for your business on a regular basis, and it generally must be the principal location of your business. This is something to keep in mind if you’re in the market for a new home, since writing off a portion of your home expenses could help offset some of the costs of homeownership.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How much can I get written off for my home office?
Using the simplified method of calculating the home office deduction, you can write off up to $1,500. Using the regular method, you’ll need to determine the percentage of your home being used for business purposes. You may then be able to deduct that percentage of certain indirect expenses (like utilities, cellphone, cable, homeowners or renters insurance, property tax, HOA fees, and cleaning services). Direct expenses for the home office, such as painting, furniture, office supplies, and repairs, are generally 100% deductible.
Can I make a claim for a home office tax deduction without receipts?
The simplified method does not require detailed records of expenses. If using the regular method, you should be prepared to defend your deduction in the event of an IRS audit.
The IRS says the law requires you to keep all records you used to prepare your tax return for at least three years from the date the return was filed.
What qualifies as a home office deduction?
Things like insurance, utilities, repairs, maintenance, equipment, and rent may qualify as tax deductions.
Photo credit: iStock/Marija Zlatkovic
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Owning a home is an integral part of the American Dream, but it can often feel more like a mirage to those wrestling with bad credit. The idea of being shackled by a poor credit score might have you convinced that the dream of homeownership is unattainable.
But here’s a plot twist — a poor credit score does not necessarily slam the door to your dream house. Yes, it might add a few challenges to the journey, but the path to homeownership is far from being erased.
In this article, we’re going to simplify the process and illuminate the steps you can take to make your dream of homeownership a reality, even with bad credit. So buckle up and prepare for a deep dive into the world of credit scores, mortgages, and the surprising possibilities that await you.
10 Steps to Buy a House With Bad Credit
Bad credit doesn’t mean a ‘no’ to homeownership—it just implies a more strategic approach is required. From understanding your credit situation and improving your score, to exploring different mortgage options and considering a larger down payment, there are several actionable steps you can take.
Let’s embark on this journey together, helping you turn the dream of owning your own home into a reachable reality, irrespective of your credit score.
1. Know Your Credit Scores
How low are your credit scores? Do you know what’s causing you to have poor credit? Or are you assuming it’s bad because of past financial missteps?
What is a ‘bad’ credit score?
What constitutes a bad credit score? Generally, the ranges are as follows:
Excellent: 781 and above
Good: 661-780
Fair: 601-660
Poor: 501-600
Bad: 500 and below
So, if your credit score is 600 or lower, you’d fall into the subprime consumer category.
Check Out Our Top Picks for 2024:
Best Mortgage Loans for Bad Credit
How Your Credit Scores are Calculated
You should also have an understanding of how your credit score is calculated so you’ll know how much to improve it before applying. The five components are as follows:
Payment history (35%): Do you make timely payments to your creditors each month? If you’ve missed several payments in the past, your credit scores could be suffering. And other past-due bills that became collection accounts also negatively impact your payment history.
Amounts owed (30%): How much do you still owe creditors? If your debt-to-available credit or credit utilization ratio on revolving accounts is high, it could affect your credit scores.
Length of credit history (15%): How long have you had credit? A more established credit profile could equate to a higher FICO score.
Credit mix (10%): Do you have a healthy mix of revolving and installment credit? Lenders like to see a combination of both, and having several of one and not the other could lower your credit scores.
New credit (10%): Have you recently opened several new credit accounts? If so, prospective lenders may see you as more of a risk.
How to Check Your Credit Score
There are several free options to choose from. However, you can start by contacting your bank to see if it’s a service provided to account holders, free of charge. Or if you have credit cards, check the statement or online dashboard as it may appear there.
Did you recently apply for a mortgage and were denied? Lenders must explain their decisions in a letter and disclose that you can request a copy of the credit report used to make the decision.
In some instances, the denial letter will explain the denial and the credit score the lender used during the evaluation process. Lenders use different algorithms and credit scoring models. However, you can use this number as a starting point.
Lastly, you can use credit monitoring tools, like Identity IQ and Identity Guard, to view variations of your credit score. They also offer great identity theft protection.
2. Rectify Errors in Your Credit Report
According to the results of a study conducted by the Federal Trade Commission (FTC), 20% of credit reports contain errors. But why does this matter? Well, what’s in your report determines your credit score. And there’s a possibility that an error could result in a low credit score and prevent you from obtaining a mortgage.
So, you’ll want to get a free copy of your report and review it from top to bottom. If you spot errors, take the following steps to have them rectified:
Step 1: Print out a hard copy of your credit report and circle the items in question.
Step 2: Draft up a letter of dispute to submit to the credit bureaus. For a template, click here.
Step 3: Send the letter, the highlighted copy of your credit report, and any supporting documentation to the credit bureaus.
Step 4: Follow-up in writing with the credit bureaus after 30 days if you still haven’t received a response.
If you need additional help with credit report errors, review this comprehensive guide from the FTC.
It can take a while for credit reports to reflect updates made by disputing errors. So, prepare to fix your credit at least a few months before applying for a mortgage. That way, you can ensure any positive changes have time to improve your credit.
What if everything is accurate?
There’s a possibility that a series of financial missteps or a rough patch has left your credit in shambles and the effects are lingering. If that’s the case, reach out to the creditors and request that they remove the negative mark from your credit report in exchange for a settlement of the account in question.
This is called a pay-for-delete agreement and can do wonders for your credit if the creditor is on board. But be sure to get the agreement in writing.
If the account is showing as a paid collection item, this approach won’t work since the account has already been paid off.
However, you can write a letter to the creditor explaining your circumstances and ask that they honor a goodwill adjustment so you can get approved for a mortgage. You may not have luck with either approach right away, but consistency could pay off.
3. Run the Numbers
Mortgage loans designed for consumers with subpar credit sometimes come at a higher cost. Why so? It’s all a matter of risk.
The mortgage lender wants to be protected if you default on the loan and the home goes into foreclosure. So, if you’re adamant about getting a mortgage with bad credit, be prepared for the financial implications.
To illustrate, assume you’re seeking a 30-year fixed-rate mortgage for $250,000. Below is an example of how the figures could play out, based on your creditworthiness:
CREDIT SCORE
MONTHLY PAYMENT
INTEREST PAID OVER LIFE OF LOAN
TOTAL COST OF LOAN
Excellent Credit
4%
$179,674
$429,674
Good Credit
5%
$233,139
$483,139
Fair Credit
6%
$289,595
$539,595
Poor Credit
7%
$348,772
$598,772
And these figures don’t even factor in property taxes, homeowner’s insurance, and private mortgage insurance (if you make a down payment that’s less than 20%).
The good news is you can always refinance the loan at a later date when your credit score and financial situation improve.
4. Consider an FHA Loan
An FHA Loan is a great option for anyone who wants to buy a house with bad credit. These loans are issued by private lenders, but the loan is guaranteed by the Federal Housing Administration. This guarantee protects the mortgage lender from borrowers that eventually default on their mortgage.
FHA loans come with less stringent requirements so they are easier to apply for than a conventional mortgage. However, FHA loans tend to have higher interest rates and closing costs than conventional mortgages.
FHA Loan Requirements
That being said, there are a few requirements you’ll need to meet:
You need a minimum credit score of 580.
You must have proof of a stable monthly income.
If your credit score is 580 or higher, you’ll need a minimum down payment of at least 3.5%.
If your credit score is 500 or higher you’ll need a minimum down payment of at least 10%.
The home you’re purchasing must be your primary residence.
There are other requirements you’ll need to meet to qualify for an FHA loan. These loans are capped at a certain amount, though this will vary depending on where you live.
You’ll also have to work with an FHA approved lender and pay private mortgage insurance (PMI), which will increase your monthly payment.
See also: FHA Loan Requirements for 2024
5. Consider a VA Loan
If you’re a veteran who has bad credit, then you may be eligible to take out a VA loan. VA loans are issued through private lenders, but the mortgage is backed by the U.S. Department of Veterans Affairs.
The program is designed to help veterans get back on their feet and has served as a lifeline for many struggling veterans. And VA loans have many advantages.
There is no down payment required, and you don’t have to purchase PMI. Additionally, there is no minimum credit score requirement. The interest rates are very competitive, and it’s fairly easy to apply for a VA loan.
VA Loan Requirements
However, there are a few requirements you’ll need to meet first:
Active duty military or a veteran who was honorably discharged.
You’ve served for at least 90 consecutive days during active wartime.
You’ve served for at least 180 consecutive days during active peacetime.
More than six years in the National Guard.
If your spouse died in the line of duty you may qualify for the VA loan program as well.
See also: VA Home Loans: Everything You Need to Know
6. Consider a USDA Loan
The USDA typically offers these no-down-payment mortgage loans in rural areas and lower-density suburbs. To qualify for a USDA loan, borrowers must meet income limits based on their household size and the median income of their county. You must also have a minimum credit score of 580.
See also: Guide for First-Time Homebuyers with Bad Credit
7. Explore Other Lending Options
If you aren’t a candidate for FHA or VA loans, you might consider alternative lenders. Loan aggregators like Lending Tree are a good way to determine if you qualify for conventional loan products.
Lending Tree won’t give you a loan but will match you with mortgage lenders that are willing to work with you. It only takes a few minutes to sign up on the company’s website, and you can receive mortgage offers from multiple lenders.
If you’ve been banking with the same financial institution for an extended period of time, you might also consider applying for a mortgage there.
Banks tend to have stricter lending requirements, but they may be willing to consider you for a mortgage based on your long-standing history with the bank. At the very least, it can’t hurt to try.
8. Save Up for a Down Payment
Lenders may be reluctant to approve you for a house with bad credit. And the higher the loan amount, the more risk they’ll have to assume.
It is more likely that you’ll be approved if you put down a large down payment, since the loan amount will be lower. Plus, you’ll save a bundle on interest.
So, how much should you save for a down payment? The standard 20% required for most conventional loans is a good starting point, but the higher, the better. (Plus, you may be able to avoid mortgage insurance).
It’s also a good idea to have as much cash in your savings account as possible. This demonstrates to lenders that despite having poor credit, you can handle financial emergencies or cover unexpected financial occurrences as they arise. It’s not necessary to stow away an entire year of income in the bank, but three to six months will suffice.
Worried about your credit taking a hit if you apply with several lenders? Don’t be. According to myFICO, “inquiries for mortgage loans generated in a 30-day window count as a single inquiry.”
So, if you shop around and apply with ten separate lenders in a 30-day window, your credit will only be impacted by one inquiry since FICO scoring models recognize that you’re conducting a home loan search.
10. Sign on the Dotted Line
Congratulations! You’ve done your homework, saved up for a down payment, and shopped around to find the lowest interest rate. Despite your credit troubles, you’ve done the legwork to buy the home of your dreams.
But if you weren’t as fortunate and found that it wasn’t the right time to buy, don’t fret. Be patient while working diligently to boost your credit score and get your finances in order.
Furthermore, be sure to make all your rent payments on time to show potential lenders that you are responsible and can handle your housing obligations. That way, you’ll have more luck next time around.
I might get a little sentimental today. This is the 20th anniversary of my — well, really our — weekly column. In addition to feeling old, I also feel grateful.
It was actually slightly more than 20 years ago that I was living in Southern California, working as a freelance writer, when an editor from the Orange County Register called. The paper was launching a monthly regional magazine targeting owners of luxury homes — think Laguna and Newport Beach — and he wanted a column that would be the antidote to potentially pretentious content.
“So,” I said, “you want a column that is not about rich homeowners and their chichi architects and their museum-quality art collections and the exquisite homes they build on the bluffs overlooking the Pacific and how the whole experience was one giant lovefest, and they had money left over?”
“Right,” he confirmed, “a reality column.”
He’d found the right writer. At that point, I had built two homes from the ground up, had the debt and cortisol levels to prove it, and had an arsenal of frustrations.
Still disbelieving, I added, “You want me to write about the tile mason with the drinking problem, the neighbors who won’t speak to you because you’ve had an outhouse and a Dumpster parked in your front yard for three months, the dogs who got so fed up with the construction they ran away in search of a rescue, and about how the remodel took three times as long, cost three times as much, and you weren’t speaking to your spouse at the end?”
“Exactly,” he said. “Sprinkle in some advice. Be the girl next door who has the same problems as everyone else but is two steps ahead, because you’ve made the mistakes and know who to call.”
Eighteen months later, my then-husband and I moved from Southern California to Colorado — just one of my many moves. And soon, I had a syndicated column. That former editor congratulated me, then ominously added: “It’s great to have a weekly column, but one day, you are going to run out of ideas.”
Until then, a dry well hadn’t been on my worry list. I flashed back to when I was in kindergarten and got in trouble for talking too much in class. I wound up in the principal’s office with my mother to discuss “the problem.” When the principal asked why I talked so much, the answer was easy. “I just have so many important things to say,” I said, which was unintentionally hilarious.
So here we are 20 years and 1,040 columns later, and I still have things to say and no shortage of topics. Because I have never been able to see where home design stops and home life begins, my columns are about both. Here’s a brief look back at some of the moments we’ve been through together:
The calamities: You were there when my two custom seven-foot sofas arrived with the upholstery fabric inside out, when the back patio in our new Colorado home fell three feet into a sink hole, and when our rescue dog on his first night with us tested our commitment on the one-day-old living room carpet. (Who gets a new dog and new carpet on the same day?)
The many moves: You were there through 10 houses and nine moves, including the move to Florida, where I had a stint as a live-in home stager and moved six times in four years.
The life changes: You were there when I sent each of my children off to college, entering some sort of self-imposed dorm-decorating contest in which I was the sole contestant. You were there through my divorce and remarriage, the loss of two parents and the gain of three grown stepchildren.
The micro and macro: Together, we’ve covered the minor (how to choose drawer knobs and tea towels) and the major (the meaning of home and belonging and how to leave a meaningful legacy.
After I wrote a simple primer on Roth conversions a couple weeks ago, several readers reached out asking for more details. A few specific snippets of those questions include:
I see many articles like this about lowering your tax bracket when doing Roth conversions. But, what about the amount of money that can be made by not doing Roth conversions and letting the taxable [sic: qualified, or not taxable] money grow in an account like an IRA or 401K? Is that math too hard to explain?
Sure your RMDs will be higher and you will be taxed more, but how much more money will you make by letting that tax deferred money grow? You could assume a rate of return at 6% for the illustration.
Kelly M., Question 1
A wise man once said “never pay a tax before you have to.” Back around 2015 I had the owner of an income tax service try to convince me to convert all my traditional IRA money to Roth. He said tax rates were going to go up and he was converting all of his own personal traditional IRAs. Fast forward to 2017 and Congress actually ended up lowering tax rates. I wonder what he thought about his conversions after that.
Anonymous, Question 2
Even with my spouse still working, I don’t think we’ll hit the IRMAA limits while I do Roth conversions before I take Medicare. But, could Roth conversions now help me avoid the IRMAA thresholds when I’m taking RMDs in the future? Or, is it worth doing Roth conversions to avoid the IRMAA thresholds? I’d be interested in an article like that.
Anonymous, Question 3
To summarize those three questions:
Does the math of Roth conversions really work?
But since we don’t know future tax rates, how can we confidently convert assets today?
What about IRMAA (the income-related monthly adjustment amount), which is an additional Medicare surcharge on high-earners?
Let’s address these questions one at a time.
Does the Math of Roth Conversions Really Work?
Roth conversions involve many moving pieces, as you’ll see in this simple Roth conversion spreadsheet.
Reminder: you can make a copy of the spreadsheet via File >> Make a Copy
There are terrific financial planning software packages that take care of this math. I wanted to present 95% of the good stuff in a free format that you all can look at. Hence, Google Sheets.
Nuanced Tax Interactions
Especially important is the interaction between normal income (via Traditional account withdrawals), capital gains, and Social Security. These taxes interplay in nuanced ways. A simple example:
Let’s say a Single retiree’s annual income is:
$5000 in interest income
$5000 in long-term capital gains
$30,000 in Social Security benefits.
If you plug that into a 1040 tax return, you’ll find that:
None of that Social Security income is taxable.
All of the interest and capital gains are enveloped by the Standard deduction
Resulting in zero taxable income and a $0.00 Federal tax bill.
But if we copied Scenario A and added in $30,000 in Traditional IRA distributions, what happens? I think we all expect that the $30,000 distribution itself must have a taxable component, but you might not know that:
The IRA distribution affects Social Security taxability. Now, $22,350 of the Social Security income becomes taxable. That’s right. Simply by distributing IRA assets, you’ve now increased how much Social Security you pay taxes on.
The Standard deduction still helps, but there’s now a remainder of $48,500 in Federal taxable income.
Resulting in a $5584 Federal tax bill.
It’s not the end of the world. Taxes happen. They pay for our public shared interests.
But part of tax planning is understanding ahead of time what your future tax bills will look like. It’s important to understand how taxes interact. And this is just a simple example!
Measuring Roth Conversion Benefits
Going back to this spreadsheet, you’ll three tabs full of retirement withdrawal math. The Assumptions tab contains important information on our hypothetical retiree’s starting point (e.g. $2.9M in investable assets), their annual spending ($100K), their future assumed growth (5% per year, after adjusting for inflation), and other important numbers.
Note – this math takes place in “the convenient world” where inflation is removed from the math.
Then three tabs are presented with different Roth conversion scenarios, described below:
“Baseline Calculations“
This tab shows a retiree not focused on any conversions
They want to leave to their children both Roth assets (if possible) and taxable assets (on a stepped-up cost basis).
Therefore, they attempt to fund as much of their retirement using Traditional assets as possible
“No Trad Withdrawals”
This tab shows a “worst case” scenario, to help bookend the analysis. This retiree is not pulling any funds from their Traditional accounts (unless necessary). Thus, we’d expect them to have large RMDs and large RMD-related tax bills.
“Reasonable Conversions”
This tab shows a “reasonable” Roth conversion timeline, electing to convert $1.7 million throughout their retirement, while funding their lifestyle using a mix of Traditional, Roth, and taxable assets along the way.
By no means is this “optimized.” But it’s reasonable, and better than the first two scenarios, as we’ll see below.
Pros, Cons, and Results
The three scenarios end up similar in multiple ways.
Our retiree never has an issue funding their annual lifestyle. This is of utmost importance.
Our retiree reaches age 90 (“death”) with roughly $5M in each scenario.
But there are important differences (as we’d suspect).
The Baseline scenario ends with $5.00M. Of that, 27% is Traditional, 35% is Roth, and 34% is Taxable. They’ve paid an effective Federal tax rate of 20.7% throughout retirement.
The No Traditional Withdrawal scenario ends with $5.20M. Of that, 63% is Tradtional, 0% is Roth, 37% is Taxable. They’ve paid an effective Federal tax rate of 18.8% throughout retirement.
The Reasonable Conversions scenario ends with $5.17M. 18% is Traditional, 68% is Roth, and 14% is Taxable. They’ve paid an effective Federal tax rate of 13.9% throughout retirement.
The Same, But Different
These three scenarios share many similarities. All three result in successful retirements. But there are important differences.
Our Roth converter paid far fewer taxes and, ultimately, left a majority of their tax dollars to their heirs via Roth vehicles, and thus tax-free.
The No Trad Withdrawal retiree paid 28% effective tax rates in their final years (only going further up in the future) and left 63% of their assets in Traditional accounts with a large asterisk on them.***
***TAXES DUE IN THE FUTURE*** …unless you’re leaving the Traditional IRA assets to, for example, a non-profit charity. But if you’re leaving the Traditional IRA to your kids, they’ll owe taxes when they withdraw the funds.
Long story short: Roth conversions work to your benefit when executed intelligently.
Should You Worry About Leaving Behind Traditional Assets?!
I don’t want to freak you out. Your heirs will appreciate you leaving behind a 401(k) or Traditional IRA for them.
But it’s worth understanding that they’ll owe taxes on that money (usually). Let’s dive into an example with simple math: a $1 million Traditional IRA left to one person (e.g. your child).
That person will most likely set up an Inherited Traditional IRAand (via new-ish rules in the SECURE Act) will have to empty that account by the end of the 10th year after your death. The withdrawals can be raised and lowered during those 10 years. Much like with Roth conversions, it makes sense to take larger withdrawals during otherwise low-income years and vice versa.
But if the beneficiary is in the middle of their career, a series of 10 equal withdrawals makes sense. Some rough math suggests ~$135,000 per year is a reasonable withdrawal amount (based on account growth over the 10 years).
That withdrawal is taxed as income for the beneficiary. If they’re already earning $100,000 per year of normal income, then taxes will consume ~$41,000 of their annual $135,000 withdrawal. State taxes might take another bite.
Again – I don’t want anyone to cry over the prospect of inheriting $94,000 annually for 10 years. Where can I sign up?! But it’s also worth understanding that 30% of this inheritance is going to Federal taxes.
“Never Pay a Tax Before You Have To”
What about Question #2 from the beginning of the article? A reader wrote in and suggested one should “never pay a tax before you have to.”
While pithy, it’s false.
If you can reasonably front-load low tax rates to prevent later high tax rates, the math supports you. What we’ve covered so far today is clear evidence of that.
Now, in the reader’s defense: I’d rather delay taxes if thedollar amounts are exactly the same. That’s one argument behind the tax-loss harvesting craze: I’d rather pay $100 in taxes in the future than $100 in taxes today.
But Roth conversions work differently. Done well, Roth conversions allow you to pay a 22% tax on $50,000 today to prevent a 37% tax on $100,000 in the future. It’s apples-and-oranges compared to the tax-loss example.
And perhaps the bigger lesson: there are few universal rules in personal finance. The pithy rule that works in one scenario (“never pay a tax before you have to”) might fail miserably in another scenario. Let the math guide you.
What About IRMAA?
Irma used to only be a name you’d give to the great-grandmother character in your 11th-grade B-minus fiction story.
No longer! Today, IRMAA has been given new life (which, I bet, was covered by Medicare!)
IRMAA (Income-Related Monthly Adjustment Amount) is a Medicare premium surcharge imposed on higher-income beneficiaries in addition to their standard Medicare Part B and Part D premiums. The amount of IRMAA is determined based on an individual’s modified adjusted gross income (MAGI) and can result in higher healthcare costs for those with higher incomes.
In plain English: high-earners pay more for Medicare.
Question #3 today asked if Roth conversions can be used to avoid IRMAA premiums. The answer is: yes.
But first, how painful are these IRMAA surcharges in the first place?!
Important note: you’ll see below that the 2023 IRMAA brackets are based on 2021 modified adjusted gross income (MAGI). That same 2-year delay holds for future years. Your 2024 Roth conversions (or lack thereof) will be important in determining IRMAA in 2026
If a married couple’s MAGI in 2021 was $225,000, they’d end up paying $231 per month (or, more accurately, $462 per month for the couple) as opposed to $330 for the couple if they earned less than $194,000. That’s a difference of $132 per month or $1584 for the year.
I’m of two minds here. Because:
Yes, I believe in frugality. A penny saved is a penny earned. Why pay $1584 extra if you don’t have to?
But if you’re earning $200,000in retirement, do you also need to stress over a $1500 annual line item?
Personally, I’ll be stoked if my retirement MAGI is $200,000. It’ll be a sign that my financial life turned out unbelievably well. I won’t mind the IRMAA.
The people most likely to suffer IRMAA are also best positioned to deal with it.
Will IRMAA Get You?
The 2-year delay in IRMAA math means you might get IRMAA’d early on in retirement.
Imagine retiring at the end of 2023. The peak of your career! You and your spouse earned a combined $300,000 and now you’re settling down to mind your knitting. Like all U.S. citizens, you sign up for Medicare just before you turn 65.
Come 2025, Uncle Sam and Aunt IRMAA are going to look back at your 2023 income and surcharge you.
But the good news, most likely, is that your 2024 income is quite low in comparison and IRMAA will drop off in 2026.
Can Roth Conversions Help?
Remember: RMDs are forced and count as income, and that has the potential of “forcing” IRMAA on retirees as they age.
So to answer our terrific reader question: yes, Roth conversions can help here. You can use Roth conversions to shift the realization of income from high years to low years, preventing or mitigating IRMAA in the process.
But once more, make sure the juice is worth the squeeze.
If a 75-year-old has a $200,000 RMD that kills them on IRMAA, ask yourself: where does a $200,000 RMD come from? Answer: it’s coming from an IRA of over $5 million. Should someone with $5 million be losing sleep over IRMAA? I don’t think so.
That’s A Lot of Numbers…
A long and math-heavy article. I hope this helped you out! We covered:
Roth conversions can be objectively helpful, decreasing taxes in retirement and shifting large portions of portfolios from Traditional accounts (with potential taxes for heirs) into Roth accounts (no taxes for heirs)
Taxes in retirement are nuanced and interconnected. In today’s example, realizing extra income (via IRA distributions) also triggered extra Social Security taxes.
It’s not bad to leave behind Traditional assets to heirs. They’re getting a wonderful gift from you. But there will be taxes, which should be planned for.
There are many scenarios where it makes sense to pay taxes before you “have” to.
IRMAA is a negative reality for many retirees, but the people most likely to suffer IRMAA are also best positioned to deal with it.
Roth conversions can be used to mitigate IRMAA over the long run.
As always, thanks for reading!
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Home improvement loans are offered by banks, online lenders and credit unions.
Unlike home equity loans, home improvement loans are generally not tax deductible.
If used for projects that substantially improve your home, you may be able to deduct the interest on a home equity loan from your taxes.
Home improvement loans generally aren’t eligible for federal tax deductions, even when used for eligible renovations or property improvements. Unlike home equity loans, which can be tax deductible, home improvement loans are unsecured debt, rendering them ineligible for tax credits.
Home improvement loans vs. home equity loans
Although home improvement and home equity loans may sound similar on paper and can be used for the same purpose, it’s important to understand the differences between the two categories.
If you turn to a home improvement loan to finance your next project rather than an equity loan, you could leave thousands of dollars in tax deductions on the table.
Home improvement loans
A home improvement loan is offered by online lenders, banks or credit unions and functions as a personal loan. Borrowers must meet the lender’s requirements to get approved and receive the funds in a lump sum. While lenders typically require good credit, some provide bad credit home improvement loans.
Most lenders offer repayment timelines between two and five years and can come with fixed or variable interest rates based on your creditworthiness. In short, home improvement loans are unsecured personal loans specifically marketed toward borrowers looking to finance renovations.
Unsecured loans or debts (like personal loans for home improvements) aren’t secured by a house or property. Therefore, they’re not eligible for the tax credits, even if the funds are used for eligible projects or improvements.
Home equity loans
Home improvement loans and home equity loans are in two different categories for a number of reasons. For one, home equity loans are secured — backed by the home — and allow you to tap into the equity you’ve built up in your home over time.
Also called a ‘second mortgage,’ these loans and lines of credit tend to have stricter usage restrictions and are higher risk. If you fail to make the payments, you run the risk of losing your home. Home equity loans and lines of credit (HELOCs) are a few of the most popular secured debts and qualify for tax deductions.
Home loans that are tax deductible
As a rule of thumb, if your home or property doesn’t back the loan, it doesn’t qualify for the tax interest deduction. However, if you’re looking to finance a specific renovation, consider a home equity loan or line of credit.
Home equity loans
A home equity loan allows you to borrow against the equity — the portion of the home you’ve already paid off — built up in your home. They typically have fixed interest rates and repayment terms of up to 30 years, but most lenders allow the borrower to choose a repayment plan.
How much you can borrow will depend on the lender and how much equity you’ve built up over time. However, many lenders cap the amount you can borrow between 80 to 85 percent of your home’s equity.
If used for projects to substantially improve your home, you may be able to deduct the interest from your loan on your taxes, even if only a portion of the balance went toward the home.
Home Equity Lines of Credit (HELOCs)
HELOCs also allow you to borrow against the equity you’ve built up over time, but rather than dispersing the amount in a lump sum, a HELOC allows you to withdraw funds over time.
Borrowers can take out how much they need when they need it. The interest is eligible for a tax credit when used for eligible projects. Because of this, HELOCs can be a great way to finance an ongoing home improvement project.
Deduction-eligible home equity loan uses
Not all home improvement projects qualify for a tax deduction, even if you use a home equity loan for financing. It’s not likely that you’ll see any interest deducted for smaller projects, like updating your kitchen cabinets or installing a patio.
The IRS has specific parameters around what qualifies as eligible. Check the specific home improvement details and deadlines before banking on a significant return this tax season.
Home office deductions
If your residence is your primary workspace, you may be able to deduct certain home office improvements or purchases. This applies to homeowners and renters residing in any home or utilizing a free-standing structure for their business. Employees will not qualify, even if they meet the other requirements.
The term “home office” is more of an umbrella term as personal property also may qualify. Among others, Boats, RVs, mobile homes and unattached garages, studios or barns fall under this category if used strictly for business.
In order to qualify, the IRS states that:
You must use a specific part of your home strictly for business purposes.
Your home (or structure) is your principal place of business, or if administrative tasks can only be performed on your property.
If you work on a hybrid schedule and only work from home a few times a week, it likely won’t qualify. “If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home,” an IRS resource page reads.
Medical-related home renovations
The installation of specialized household equipment for medical care to support you, your spouse or your dependent may qualify for a tax break, but only if the additions fall within certain parameters.
For example, the value of the property must not be increased by the renovation for the entire cost to be considered a taxable medical expense. Such improvements may include:
Widening hallways and doorways.
Adding ramps or lifts to accommodate for a wheelchair.
Modifying stairwells.
Lowering (or modifying) kitchen appliances, cabinets or household electrical outlets.
Any amount paid (or borrowed) for medical upkeep and operation also qualifies as long as the funds are used strictly for medical purposes and the installation of a specialized plumbing system for a person with a disability.
If you’re unsure whether your renovations qualify, consider the primary function of the addition and the potential value-add it gives your home. “Only reasonable costs to accommodate a home to your disabled condition are considered medical care,” the IRS tax resource reads. “Additional costs for personal motives, such as for architectural or aesthetic reasons, aren’t medical expenses.”
Energy efficient installations
If you’ve installed energy efficient equipment — think solar panels, energy efficient windows, skylights and doors, biomass equipment or small wind turbines — then you may qualify for a tax break on your next return.
Also called the residential clean energy property credit, qualifying eco-friendly renovations made after Dec. 31, 2021, and before Jan. 1, 2033, are eligible for a tax credit totaling up to 30 percent of the equipment costs. Any expenditure made in 2033 can result in a 26 percent maximum tax credit and a 22 percent maximum credit for property placed in 2034. There will be no credit available for renovations made Dec. 31, 2034.
What constitutes a qualifying cost when calculating the deduction percentage will vary based on the type of eco-friendly equipment you’ve had installed. There’s also a $1,200 aggregate yearly tax credit maximum for home components, energy audits and energy property, while qualifying heaters, stoves and boilers have a separate $2,000 limit.
Which is better: home equity or home improvement loans?
While there isn’t a ‘right’ answer as to which product is better, there are projects that are better suited for certain projects. For example, home improvement loans are best for smaller projects that don’t qualify for tax deductions, especially if you don’t have significant home equity built up.
For larger and longer renovations, HELOCs may be the better option for qualifying borrowers. Home equity loans are well suited for long-term homeowners with less strenuous projects that qualify for tax credits.
Average mortgage rates edged higher yesterday. Although the change was negligible, it was enough to return them to their recent high, first reached last Thursday. However, they’re still way lower than the near-8% levels seen as recently as last October.
Earlier this morning, markets were signaling that mortgage rates today might barely move. However, these early mini-trends often switch direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.36%
7.37%
+0.01
Conventional 15-year fixed
6.76%
6.79%
Unchanged
Conventional 20-year fixed
7.06%
7.09%
Unchanged
Conventional 10-year fixed
6.65%
6.68%
-0.01
30-year fixed FHA
6.42%
7.11%
+0.03
30-year fixed VA
6.71%
6.83%
-0.01
5/1 ARM Conventional
6.18%
7.32%
-0.01
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
Many investors now expect the Federal Reserve to implement its first cut in general interest rates in June. And to make only three modest cuts during 2024.
That’s very different from their expectations at the start of this year. Then, they thought the first cut would be in March followed by five more before Dec. 31.
It’s this shift in expectations, from the optimistic to the realistic, that largely explains why mortgage rates have been moving higher in recent weeks. And it’s my top reason for now thinking that mortgage rates probably won’t begin to trend consistently lower until well into the second (April-June) quarter.
So, for now, my personal rate lock recommendations are:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes held steady 4.30%. (Neutral for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were falling this morning. (Good for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices climbed to $79.34 from $78.19 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices inched down to $2,042 from $2,044 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — increased to 79 from 76 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to hold steady or close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
This morning brought the second reading (of three) of gross domestic product (GDP) during the fourth quarter of last year. And it will likely hardly affect mortgage rates.
Today’s figure showed growth that quarter at 3.2%. Markets had been expecting it to be unchanged from its first reading at 3.3%. And they’d already priced that figure into mortgage rates.
Ten-year Treasury notes edged lower on the news. But mortgage rates didn’t immediately follow, and the difference between the actual figure and market expectations may not be enough to change them.
Tomorrow
We’re due January’s personal consumption expenditures (PCE) price index tomorrow. This is the Federal Reserve’s favorite gauge of inflation. So it certainly has the potential to move markets and mortgage rates, not least because it could influence decisions about the timing and scope of the Fed’s future cuts in general interest rates.
Tomorrow brings four key figures: two for the all-items PCE price index and two for the “core” PCE price index. The core figure is the all-items one after volatile food and energy prices have been stripped out, something that supposedly reveals underlying inflation. The Fed focuses on core figures.
There are two figures for each of these indexes. The first shows how prices moved in the month of January. And the second is the year-over-year (YOY) number, which shows how the same prices moved between Feb. 1, 2023 and Jan. 31, 2024.
Tomorrow’s inflation and other data
Here are what markets are expecting tomorrow (with December’s actual figures in brackets):
January all-items PCE price index — 0.3% (0.2 % in December)
January core PCE price index —0.4% (0.2% in December)
YOY all-items PCE price index — 2.4% (2.6 % in December)
YOY core PCE price index —2.8% (2.8% in December)
You can see that markets are expecting a small increase in most of these measures of inflation. And, because they’re expecting them, they’ll have already priced those into mortgage rates. So, if the figures come in as forecast, mortgage rates might barely move.
However, higher-than-expected figures could push those rates upward. Conversely, lower-than-expected ones could drag them downward.
Other economic reports due tomorrow rarely move mortgage rates far or for long, especially when they’re overshadowed by a major report like the PCE price index.
Ten senior Fed officials have speaking engagements tomorrow and on Friday, all after tomorrow’s report. And those could change mortgage rates if enough of them say things that cheer up or depress investors. But we can only wait to hear their remarks.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Feb. 22 report put that same weekly average at 6.90% up from the previous week’s 6.77%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
The VA home loan: Unbeatable benefits for veterans
For many who qualify, VA home loans are some of the best mortgages available.
Verify your VA loan eligibility. Start here
Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost.
The VA loan asks for no down payment, requires no mortgage insurance, and has lenient rules about qualifying, among many other advantages.
Here’s everything you need to know about qualifying for and using a VA loan.
In this article (Skip to…)
Top 10 VA loan benefits
1. No down payment on a VA loan
Most home loan programs require you to make at least a small down payment to buy a home. The VA home loan is an exception.
Verify your VA loan eligibility. Start here
Rather than paying 5%, 10%, 20% or more of the home’s purchase price upfront in cash, with a VA loan you can finance up to 100% of the purchase price.
The VA loan is a true no-money-down home mortgage opportunity.
2. No mortgage insurance for VA loans
Typically, lenders require you to pay for mortgage insurance if you make a down payment that’s less than 20%.
This insurance — which is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan — would protect the lender if you defaulted on your loan.
VA loans require neither a down payment nor mortgage insurance. That makes a VA-backed mortgage very affordable upfront and over time.
3. VA loans have a government guarantee
There’s a reason why the VA loan comes with such favorable terms.
The federal government guarantees these loans — meaning a portion of the loan amount will be repaid to the lender even if you’re unable to make monthly payments for whatever reason.
This guarantee encourages and enables private lenders to offer VA loans with exceptionally attractive terms.
4. You can shop for the best VA loan rates
VA loans are neither originated nor funded by the VA. They are not direct loans from the government. Furthermore, mortgage rates for VA loans are not set by the VA itself.
Instead, VA loans are offered by U.S. banks, savings-and-loans institutions, credit unions, and mortgage lenders — each of which sets its own VA loan rates and fees.
This means you can shop around and compare loan offers and still choose the VA loan that works best for your budget.
5. VA loans don’t allow a prepayment penalty
A VA loan won’t restrict your right to sell the property partway through your loan term.
There’s no prepayment penalty or early-exit fee no matter within what time frame you decide to sell your home.
Furthermore, there are no restrictions regarding a refinance of your VA loan.
You can refinance your existing VA loan into another VA loan via the agency’s Interest Rate Reduction Refinance Loan (IRRRL) program, or switch into a non-VA loan at any time.
6. VA mortgages come in many varieties
A VA loan can have a fixed rate or an adjustable rate. In addition, you can use a VA loan to buy a house, condo, new-built home, manufactured home, duplex, or other types of properties.
Or, it can be used for refinancing your existing mortgage, making repairs or improvements to your home, or making your home more energy-efficient.
The choice is yours. A VA-approved lender can help you decide.
Verify your VA loan eligibility. Start here
7. It’s easier to qualify for VA loans
Like all mortgage types, VA loans require specific documentation, an acceptable credit history, and sufficient income to make your monthly payments.
But, compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guarantee.
The Department of Veterans Affairs genuinely wants to make the loan process easier for military members, veterans, and qualifying military spouses to buy or refinance a home.
8. VA loan closing costs are lower
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way that a VA loan can be more affordable than other types of loans.
Money saved on closing costs can be used for furniture, moving costs, home improvements, or anything else.
9. The VA offers funding fee flexibility
VA loans require a “funding fee,” an upfront cost based on your loan amount, your type of eligible service, your down payment size, and other factors.
Funding fees don’t need to be paid in cash, though. The VA allows the fee to be financed with the loan, so nothing is due at closing.
And, not all VA borrowers will pay it. VA funding fees are normally waived for veterans who receive VA disability compensation and for unmarried surviving spouses of veterans who died in service or as a result of a service-connected disability.
10. VA loans are assumable
Most VA loans are “assumable,” which means you can transfer your VA loan to a future home buyer if that person is also VA-eligible.
Assumable loans can be a huge benefit when you sell your home — especially in a rising mortgage rate environment.
If your home loan has today’s low rate and market rates rise in the future, the assumption features of your VA become even more valuable.
VA loan rates
The VA loan is viewed as one of the lowest-risk mortgage types available on the market.
Verify your VA loan eligibility. Start here
This safety allows banks to lend to veteran borrowers at lower interest rates.
Today’s VA loan rates*
Loan Type
Current Mortgage Rate
VA 30-year FRM
% (% APR)
Conventional 30-year FRM
% (% APR)
VA 15-year FRM
% (% APR)
Conventional 15-year FRM
% (% APR)
*Current rates provided daily by partners of the Mortgage Reports. See our loan assumptions here.
VA rates are more than 25 basis points (0.25%) lower than conventional rates on average, according to data collected by mortgage software company Ellie Mae.
Most loan programs require higher down payment and credit scores than the VA home loan. In the open market, a VA loan should carry a higher rate due to more lenient lending guidelines and higher perceived risk.
Yet the result of the Veterans Affairs efforts to keep veterans in their homes means lower risk for banks and lower borrowing costs for eligible veterans.
VA mortgage calculator
Eligibility
Am I eligible for a VA home loan?
Contrary to popular belief, VA loans are available not only to veterans, but also to other classes of military members.
Find and lock a low VA loan rate today. Start here
The list of eligible VA borrowers includes:
Active-duty service members
Members of the National Guard
Reservists
Surviving spouses of veterans
Cadets at the U.S. Military, Air Force or Coast Guard Academy
Midshipmen at the U.S. Naval Academy
Officers at the National Oceanic & Atmospheric Administration.
A minimum term of service is typically required.
Minimum service required for a VA mortgage
VA home loans are available to active-duty service members, veterans (unless dishonorably discharged), and in some cases, surviving family members.
To be eligible, you need to meet one of these service requirements:
You’ve served 181 days of active duty during peacetime
You’ve served 90 days of active duty during wartime
You’ve served six years in the Reserves or National Guard
Your spouse was killed in the line of duty and you have not remarried
Your eligibility for the VA home loan program never expires.
Veterans who earned their VA entitlement long ago are still using their benefit to buy homes.
The VA loan Certificate of Eligibility (COE)
What is a COE?
In order to show a mortgage company you are VA-eligible, you’ll need a Certificate of Eligibility (COE). Your lender can acquire one for you online, usually in a matter of seconds.
Verify your VA home loan eligibility. Start here
How to get your COE (Certificate of Eligibility)
Getting a Certificate of Eligibility (COE) is very easy in most cases. Simply have your lender order the COE through the VA’s automated system. Any VA-approved lender can do this.
Alternatively, you can order your certificate yourself through the VA benefits portal.
If the online system is unable to issue your COE, you’ll need to provide your DD-214 form to your lender or the VA.
Does a COE mean you are guaranteed a VA loan?
No, having a Certificate of Eligibility (COE) doesn’t guarantee a VA loan approval.
Your COE shows the lender you’re eligible for a VA loan, but no one is guaranteed VA loan approval.
You must still qualify for the loan based on VA mortgage guidelines. The guarantee part of the VA loan refers to the VA’s promise to the lender of repayment if the borrower defaults.
Qualifying for a VA mortgage
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits based on your military status or affiliation doesn’t necessarily mean you’ll qualify for a VA loan.
You still have to qualify for a VA mortgage based on your credit, debt, and income.
Verify your VA loan eligibility. Start here
Minimum credit score for a VA loan
The VA has established no minimum credit score for a VA mortgage.
However, many VA mortgage lenders require minimum FICO scores of 620 or higher — so apply with many lenders if your credit score might be an issue.
Even VA lenders that allow lower credit scores don’t accept subprime credit.
VA underwriting guidelines state that applicants must have paid their obligations on time for at least the most recent 12 months to be considered satisfactory credit risks.
In addition, the VA usually requires a two-year waiting period following a Chapter 7 bankruptcy or foreclosure before it will insure a loan.
Borrowers in Chapter 13 must have made at least 12 on-time payments and secure the approval of the bankruptcy court.
Verify your VA loan home buying eligibility. Start here
VA loan debt-to-income ratios
The relationship of your debts and your income is called your debt-to-income ratio, or DTI.
VA underwriters divide your monthly debts (car payments, credit cards, and other accounts, plus your proposed housing expense) by your gross (before-tax) income to come up with your debt-to-income ratio.
For instance:
If your gross income is $4,000 per month
And your total monthly debt is $1,500 (including the new mortgage, property taxes and homeowners insurance, plus other debt payments)
Then your DTI is 37.5% (1500/4000=0.375)
A DTI over 41% means the lender has to apply additional formulas to see if you qualify under residual income guidelines.
VA residual income rules
VA underwriters perform additional calculations that can affect your mortgage approval.
Factoring in your estimated monthly utilities, your estimated taxes on income, and the area of the country in which you live, the VA arrives at a figure which represents your “true” costs of living.
It then subtracts that figure from your income to find your residual income (e.g. your money “left over” each month).
Think of the residual income calculation as a real-world simulation of your living expenses.
It is the VA’s best effort to ensure that military families have a stress-free homeownership experience.
Here is an example of how residual income works, assuming a family of four which is purchasing a 2,000 square-foot home on a $5,000 monthly income.
Future house payment, plus other debt payments: $2,500
Monthly estimated income taxes: $1,000
Monthly estimated utilities at $0.14 per square foot: $280
This leaves a residual income calculation of $1,220.
Now, compare that residual income to for a family of four:
Northeast Region: $1,025
Midwest Region: $1,003
South Region: $1,003
West Region: $1,117
The borrower in our example exceeds VA’s residual income standards in all parts of the country.
Therefore, despite the borrower’s debt-to-income ratio of 50%, the borrower could get approved for a VA loan.
Verify your VA loan eligibility. Start here
Qualifying for a VA loan with part-time income
You can qualify for this type of financing even if you have a part-time job or multiple jobs.
You must show a 2-year history of making consistent part-time income, and stability in the number of hours worked. The lender will make sure any income received appears stable. See our complete guide to getting a mortgage when you’re self-employed or work part-time.
VA funding fees and loan limits
About the VA funding fee
The VA charges an upfront fee to defray the costs of the program and make it sustainable for the future.
Veterans pay a lump sum that varies depending on the loan purpose and down payment amount.
The fee is normally wrapped into the loan. It does not add to the cash needed to close the loan.
Find out if you qualify for a VA loan. Start here
VA home purchase funding fees
Type of Military Service
Down Payment
Fee for First-Time Use
Fee for Subsequent Use
Active Duty, Reserves, and National Guard
None
2.3%
3.6%
5% or more
1.65%
1.65%
10% or more
1.4%
1.4%
VA cash-out refinance funding fees
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
2.3%
3.6%
VA streamline refinances (IRRRL) & assumptions
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
0.5%
0.5%
Manufactured home loans not permanently affixed
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
1.0%
1.0%
VA loan limits in 2024
VA loan limits have been repealed, thanks to the Blue Water Navy Vietnam Veterans Act of 2019.
There is no maximum amount for which a home buyer can receive a VA loan, at least as far as the VA is concerned.
However, private lenders may set their own limits. So check with your lender if you are looking for a VA loan above local conforming loan limits.
Verify your VA loan eligibility. Start here
Eligible property types
Houses you can buy with a VA loan
VA mortgages are flexible about what types of property you can and can’t purchase. A VA loan can be used to buy a:
Detached house
Condo
New-built home
Manufactured home
Duplex, triplex or four-unit property
Find out if you qualify for a VA loan. Start here
You can also use a VA mortgage to refinance an existing loan for any of those types of properties.
VA loans and second homes
Federal regulations limit loans guaranteed by the Department of Veterans Affairs to “primary residences” only.
However, “primary residence” is defined as the home in which you live “most of the year.”
Therefore, if you own an out-of-state residence in which you live for more than six months of the year, this other home, whether it’s your vacation home or retirement property, becomes your official “primary residence.”
For this reason, VA loans are popular among aging military borrowers.
Buying a multi-unit home with a VA loan
VA loans allow you to buy a duplex, triplex, or four-plex with 100% financing. You must live in one of the units.
Buying a home with more than one unit can be challenging.
Mortgage lenders consider these properties riskier to finance than traditional, single-family residences, so you’ll need to be a stronger borrower.
VA underwriters must make sure you will have enough emergency savings, or cash reserves, after closing on your house. That’s to ensure you’ll have money to pay your mortgage even if a tenant fails to pay rent or moves out.
The minimum cash reserves needed after closing is six months of mortgage payments (covering principal, interest, taxes, and insurance – PITI).
Your lender will also want to know about previous landlord experience you’ve had, or any experience with property maintenance or renting.
If you don’t have any, you may be able to sidestep that issue by hiring a property management company. But that’s up to the individual lender.
Your lender will look at the income (or potential income) of the rental units, using either existing rental agreements or an appraiser’s opinion of what the units should fetch.
They’ll usually take 75% of that amount to offset your mortgage payment when calculating your monthly expenses.
VA loans and rental properties
You cannot use a VA loan to buy a rental property. You can, however, use a VA loan to refinance an existing rental home you once occupied as a primary home.
For home purchases, in order to obtain a VA loan, you must certify that you intend to occupy the home as your principal residence.
If the property is a duplex, triplex, or four-unit apartment building, you must occupy one of the units yourself. Then you can rent out the other units.
The exception to this rule is the VA’s Interest Rate Reduction Refinance Loan (IRRRL).
This loan, also known as the VA Streamline Refinance, can be used for refinancing an existing VA loan on a home where you currently live or where you used to live, but no longer do.
Check your VA IRRRL eligibility. Start here
Buying a condo with a VA loan
The VA maintains a list of approved condo projects within which you may purchase a unit with a VA loan.
At VA’s website, you can search for the thousands of approved condominium complexes across the U.S.
If you are VA-eligible and in the market for a condo, make sure the unit you’re interested in is approved.
As a buyer, you are probably not able to get the complex VA-approved. That’s up to the management company or homeowner’s association.
If a condo you like is not approved, you must use other financing like an FHA or conventional loan or find another property.
Note that the condo must meet FHA or conventional guidelines if you want to use those types of financing.
Veteran mortgage relief with the VA loan
The U.S. Department of Veterans Affairs, or VA, provides home retention assistance. The VA intervenes when a veteran is having trouble making home loan payments.
The VA works with loan servicers to offer loan options to the veteran, other than foreclosure.
Find out if you qualify for a VA loan. Start here
In fiscal year 2019, the VA made over 400,000 contact actions to reach borrowers and loan servicers. The intent was to work out a mutually agreeable repayment option for both parties.
More than 100,000 veteran homeowners avoided foreclosure in 2019 alone thanks to this effort.
The initiative has saved the taxpayer an estimated $2.6 billion. More importantly, vast numbers of veterans and military families got another chance at homeownership.
When NOT to use a VA loan
If you have good credit and 20% down
A primary advantage to VA home loans is the lack of mortgage insurance.
However, the VA guarantee does not come free of charge. Borrowers pay an upfront funding fee, which they usually choose to add to their loan amount.
The fee ranges from 1.4% to 3.6%, depending on the down payment percentage and whether the home buyer has previously used his or her VA mortgage eligibility. The most common fee is 2.3%.
Find out if you qualify for a VA loan. Start here
On a $200,000 purchase, a 2.3% fee equals $4,600.
However, buyers who choose a conventional mortgage and put 20% down get to avoid mortgage insurance and the upfront fee. For these military home buyers, the VA funding fee might be an unnecessary expense.
The exception: Mortgage applicants whose credit rating or income meets VA guidelines but not those of conventional mortgages may still opt for VA.
If you’re on the “CAIVRS” list
To qualify for a VA loan, you must prove you have made good on previous government-backed debts and that you have paid taxes.
The Credit Alert Verification Reporting System, or “CAIVRS,” is a database of consumers who have defaulted on government obligations. These individuals are not eligible for the VA home loan program.
If you have a non-veteran co-borrower
Veterans often apply to buy a home with a non-veteran who is not their spouse.
This is okay. However, it might not be their best choice.
As the veteran, your income must cover your half of the loan payment. The non-veteran’s income cannot be used to compensate for the veteran’s insufficient income.
Plus, when a non-veteran owns half the loan, the VA guarantees only half that amount. The lender will require a 12.5% down payment for the non-guaranteed portion.
The Conventional 97 mortgage, on the other hand, allows down payments as low as 3%.
Another low-down-payment mortgage option is the FHA home loan, for which 3.5% down is acceptable.
The USDA home loan also requires zero down payment and offers similar rates to VA loans. However, the property must be within USDA-eligible areas.
If you plan to borrow with a non-veteran, one of these loan types might be your better choice.
Explore your mortgage options. Start here
If you apply with a credit-challenged spouse
In states with community property laws, VA lenders must consider the credit rating and financial obligations of your spouse. This rule applies even if he or she will not be on the home’s title or even on the mortgage.
Such states are as follows.
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
A spouse with less-than-perfect credit or who owes alimony, child support, or other maintenance can make your VA approval more challenging.
Apply for a conventional loan if you qualify for the mortgage by yourself. The spouse’s financial history and status need not be considered if he or she is not on the loan application.
Verify your VA loan home buying eligibility. Start here
If you want to buy a vacation home or investment property
The purpose of VA financing is to help veterans and active-duty service members buy and live in their own home. This loan is not meant to build real estate portfolios.
These loans are for primary residences only, so if you want a ski cabin or rental, you’ll have to get a conventional loan.
If you want to purchase a high-end home
Starting January 2020, there are no limits to the size of mortgage a lender can approve.
However, lenders may establish their own limits for VA loans, so check with your lender before applying for a large VA loan.
Spouses and the VA mortgage program
What spouses are eligible for a VA loan?
What if the service member passes away before he or she uses the benefit? Eligibility passes to an unremarried spouse, in many cases.
Find and lock a low VA loan rate today. Start here
For the surviving spouse to be eligible, the deceased service member must have:
Died in the line of duty
Passed away as a result of a service-connected disability
Been missing in action, or a prisoner of war, for at least 90 days
Been a totally disabled veteran for at least 10 years prior to death, and died from any cause
Also eligible are remarried spouses who married after the age of 57, on or after December 16, 2003.
In these cases, the surviving spouse can use VA loan eligibility to buy a home with zero down payment, just as the veteran would have.
VA loan benefits for surviving spouses
Surviving spouses have an additional VA loan benefit, however. They are exempt from the VA funding fee. As a result, their loan balance and monthly payment will be lower.
Surviving spouses are also eligible for a VA streamline refinance when they meet the following guidelines.
The surviving spouse was married to the veteran at the time of death
The surviving spouse was on the original VA loan
VA streamline refinancing is typically not available when the deceased veteran was the only applicant on the original VA loan, even if he or she got married after buying the home.
In this case, the surviving spouse would need to qualify for a non-VA refinance, or a VA cash-out loan.
A cash-out mortgage through VA requires the military spouse to meet home purchase eligibility requirements.
If this is the case, the surviving spouse can tap into the home’s equity to raise cash for any purpose, or even pay off an FHA or conventional loan to eliminate mortgage insurance.
Qualifying if you receive (or pay) child support or alimony
Buying a home after a divorce is no easy task.
If, prior to your divorce, you lived in a two-income household, you now have less spending power and a reduced monthly income for purposes of your VA home loan application.
With less income, it can be harder to meet both the VA Home Loan Guaranty’s debt-to-income (DTI) guidelines and the VA residual income requirement for your area.
Receiving alimony or child support can counteract a loss of income.
Mortgage lenders will not require you to provide information about your divorce agreement’s alimony or child support terms, but if you’re willing to disclose, it can count toward qualifying for a home loan.
Different VA-approved lenders will treat alimony and child support income differently.
Typically, you will be asked to provide a copy of your divorce settlement or other court paperwork to support the alimony and child support payments.
Lenders will then want to see that the payments are stable, reliable, and likely to continue for another 36 months, at least.
You may also be asked to show proof that alimony and child support payments have been made in the past reliably, so that the lender may use the income as part of your VA loan application.
If you are the payor of alimony and child support payments, your debt-to-income ratio can be harmed.
Not only might you be losing the second income of your dual-income households, but you’re making additional payments that count against your outflows.
VA mortgage lenders make careful calculations with respect to such payments.
You can still get approved for a VA loan while making such payments — it’s just more difficult to show sufficient monthly income.
VA loan assumption
What is VA loan assumption?
One benefit for home buyers is that VA loans are assumable. When you assume a mortgage loan, you take over the current homeowner’s monthly payment.
Verify your VA loan home buying eligibility. Start here
That could be a big advantage if mortgage rates have risen since the original owner purchased the home. The buyer would be able to acquire a low-rate, affordable loan — and it could make it easier for the seller to find a willing buyer in a tough market.
VA loan assumption savings
Buying a home via an assumable mortgage loan is even more appealing when interest rates are on the rise.
For example:
Say a seller-financed $200,000 for their home in 2013 at an interest rate of 3.25% on a 30-year fixed loan
Using this scenario, their principal and interest payment would be $898 per month
Let’s assume current 30-year fixed rates averaged 4.10%
If you financed $200,000 at 4.10% for a 30-year loan term, your monthly principal and interest payment would be $966 per month
Additionally, because the seller has already paid four years into the loan term, they’ve already paid nearly $25,000 in interest on the loan.
By assuming the loan, you would save $34,560 over the 30-year loan due to the difference in interest rates. You would also save roughly $25,000 thanks to the interest already paid by the sellers.
That comes out to a total savings of almost $60,000!
How to assume (take on) a VA loan
There are currently two ways to assume a VA loan.
The new buyer is a qualified veteran who “substitutes” his or her VA eligibility for the eligibility of the seller
The new home buyer qualifies through VA standards for the mortgage payment. This is the safest method for the seller as it allows the loan to be assumed knowing that the new buyer is responsible for the loan, and the seller is no longer responsible for the loan
The lender and/or the VA needs to approve a loan assumption.
Loans serviced by a lender with automatic authority may process assumptions without sending them to a VA Regional Loan Center.
For lenders without automatic authority, the loan must be sent to the appropriate VA Regional Loan Center for approval. This loan process will typically take several weeks.
When VA loans are assumed, it’s the servicer’s responsibility to make sure the homeowner who assumes the property meets both VA and lender requirements.
VA loan assumption requirements
For a VA mortgage assumption to take place, the following conditions must be met:
The existing loan must be current. If not, any past due amounts must be paid at or before closing
The buyer must qualify based on VA credit and income standards
The buyer must assume all mortgage obligations, including repayment to the VA if the loan goes into default
The original owner or new owner must pay a funding fee of 0.5% of the existing principal loan balance
A processing fee must be paid in advance, including a reasonable estimate for the cost of the credit report
Find out if you qualify for a VA loan. Start here
Finding assumable VA loans
There are several ways for home buyers to find an assumable VA loan.
Believe it or not, print media is still alive and well. Some home sellers advertise their assumable home for sale in the newspaper, or in a local real estate publication.
There are a number of online resources for finding assumable mortgage loans.
Websites like TakeList.com and Zumption.com give homeowners a way to showcase their properties to home buyers looking to assume a loan.
With the help of the Multiple Listing Service (MLS), real estate agents remain a great resource for home buyers.
This applies to home buyers specifically searching for assumable VA loans as well.
How do I apply for a VA loan?
You can easily and quickly have a lender pull your certificate of eligibility (COE) to make sure you’re able to get a VA loan.
Most mortgage lenders offer VA home loans. So you’re free to shop and compare rates with just about any company that catches your eye.
Getting a VA loan for your new home is similar in many ways to securing any other purchase loan. Once you find an ideal home in your price range, you make a purchase offer, and then undergo VA appraisal and underwriting.
VA appraisal ensures that the home meets its minimum property requirements (MPRs) and is structurally sound and safe for occupancy.
What’s more, VA-specific mortgage lenders are actually some of the highest-rated (and lowest-priced) on the market. Here are a few we’d recommend checking out.
Time to make a move? Let us find the right mortgage for you